Physical Gold Bar and Coin Sales Soar 78% To All Time High

Purchases of physical gold have been hitting new all time records. Demand has been fueled by the recent pullback in gold prices and the massive amount of money printing being conducted by central banks in Europe, Japan and the United States. The recent decision by the Federal Reserve to postpone any curtailment of its $85 billion per month of money printing could mark the end of the correction in gold and silver. The Fed's refusal to reduce the ongoing program of securities purchases signals that QE has morphed from an emergency measure to a permanent Fed policy.

YLG Bullion International, Thailand’s biggest domestic gold importer, expects to more than double purchases this year after the bear market in prices spurred a surge in demand for physical metal.

The company may import as much as 200 metric tons in 2013, from 92 tons last year, Chief Executive Officer Pawan Nawawattanasub said in an interview yesterday. First-half shipments advanced to 112 tons, accounting for 60 percent of the country’s total, she said. A ton is valued at $42.6 million.

Gold tumbled 21 percent this year, heading for the first annual retreat since 2000, as some investors lost faith in the metal as a store of wealth. With prices now 32 percent below the record reached in September 2011, the rout is boosting demand for bullion bars and coins, global sales of which surged 78 percent to an all-time high in the second quarter, according to the London-based World Gold Council.

“Cheaper prices are attracting customers to buy bullion bars as they see it as money better spent than on something like a Hermes bag,” said Pawan, whose Bangkok-based company supplies retailers and investors in Southeast Asia’s second-biggest economy. “Demand in Thailand can continue to grow, partly because collecting gold is in our culture.”

Gold demand in Thailand is exceeded only by China and India. Total gold demand in China and India in the form of jewelry, bars and coins is expected to reach 1,000 tons this year and gold demand in Thailand should reach 200 tons. Total Asian gold demand from China, India and Thailand could amount to half of total world gold production of approximately 2,400 tons in 2013.

Even more astonishing is the fact that the entire world's production of gold this year will be purchased by only three sources. According to King World News, total gold buying by central banks, China and India is "almost equivalent to the annualized gold production of the entire world." It is only a matter of time before a shortage of physical gold based on huge demand results in significantly higher prices.